Editorial
Maintaining team performance after layoffs is a struggle. And when companies have gone through multiple rounds of layoffs, with more planned, the difficulties leaders face in keeping their teams productive and engaged is compounded.
The stakes are enormous. Research shows that 74% of surviving employees report decreased productivity following layoffs, while 77% report seeing more errors and mistakes at work. Even more concerning, layoffs damage organizational commitment, making employees 2.5 times more likely to leave voluntarily.
There is a silver lining amid these challenges: not only can teams survive layoffs, they can emerge stronger. The difference lies in how individual team leaders respond during the first critical weeks after the company announces workforce reductions.
The Hidden Financial Reality
Executives and board members often don't realize that layoffs often fail to improve profitability and can actually produce the opposite financial effect they expect. Research tracking Fortune 100 companies over five years found that financial performance worsened, rather than improved, following layoffs. Harvard Business Review studies spanning two decades show that the majority of firms that conduct layoffs don’t see the improved profitability they hoped for.
This makes effective team leadership during layoffs not just a human imperative, but a business necessity. When the organizational strategy is counterproductive, individual managers’ ability to lead their teams through tumult becomes the determining factor in whether companies recover or spiral further downward.
Employee Morale and Health After Layoffs
Employee experience drops significantly following layoffs, according to Culture Amp, including:
- Employee confidence in their company dropped 16.9%
- Belief in career opportunities dropped 12.1%
- Confidence in leadership dropped 10.5%
Layoffs also destroy employee trust and wreak long-term impacts on people’s health and finances, including an 83% rise in the odds of developing a new health condition within 15-18 months of being laid off.
The Psychology of Survival
When layoffs hit, remaining employees often experience "layoff survivor syndrome," a mix of guilt about retaining their jobs after colleagues lost theirs, anxiety about potential future cuts and uncertainty about job security. When this emotional turbulence goes unaddressed, it gives rise to commitment, quality and accuracy issues that compound productivity problems.
The temptation for many leaders is avoidance, in the hopes that teams adjust and the problem resolves itself. But research consistently shows this approach backfires.
Teams that don’t address the psychological impact of layoffs take significantly longer to recover, if they recover at all. Joel Brockner’s decades of research on “survivor syndrome” shows that employees who remain after layoffs experience guilt, anxiety and distrust that undermine performance if leaders fail to address it. Additional studies confirm that employees experience sustains lasting drops in trust, morale and productivity when leaders stay silent. More recent data shows that engagement and morale can take years — not months — to rebound after layoffs without proactive leadership.
How Successful Leaders Manage Teams After Layoffs
Effective leaders know how to support employees after layoffs: they tackle the emotional impact head-on by holding team meetings within 24 hours of layoff announcements. They acknowledge the difficulty, share what information they have about the team's situation and commit to regular updates rather than letting uncertainty fester.
Nokia's massive restructuring in 2011 provides a compelling example of transparent communication in action. The company provided employees facing job loss with months of advance notice and a structured offboarding plan. The result was 85% satisfaction rates among those laid off because leaders communicated early and honestly about future changes.
This positive communication approach extends beyond initial announcements. High-performing leaders dramatically increase their communication frequency, often holding team meetings three times more often during the first months after layoffs. This prevents the information vacuum that breeds rumors and speculation.
Strategic Work Redistribution
A critical error leaders make when navigating a reduced headcount is distributing departed employees' responsibilities among remaining team members, a guaranteed recipe for overload and burnout. Instead, smart leaders use layoffs as opportunities to eliminate low-value activities and re-focus teams on high-impact work.
The process begins by mapping all team activities and categorizing them by business impact. Work that doesn't directly contribute to key objectives gets eliminated or significantly reduced. When redistributing essential responsibilities, effective leaders align assignments with individual team members' skills and experience rather than spreading work equally.
Research supports this strategic approach. Workplace resources that match employee capabilities are strongly related to both employee well-being and performance.
When team members absorb additional responsibilities after layoffs, they often need new capabilities to enhance organization and prioritization. Research shows that task prioritization is considered the most important non-technical skill when working with expanded responsibilities. Smart leaders provide training in prioritization frameworks and time management immediately following layoffs.
One Best Practice to Retain Employees After Layoffs
One of the greatest threats to teams post-layoffs is the cascade effect of voluntary departures. When commitment is already damaged, losing additional high performers can devastate remaining team capacity when organizations need it most.
One of the best employee retention strategies after layoffs is conducting stay interviews with critical team members within the first week after layoffs. These structured conversations focus on five key questions:
- What energizes them most about their current role?
- What would they change if they could?
- What keeps them at the organization?
- What might tempt them to leave?
- How can leadership better support their career development?
Comparing Leadership Styles After Layoffs
The contrast between different leadership approaches is stark. Leaders typically exhibit three distinct patterns through layoffs, including the recovery timeline post-layoffs:
| Under-Performers | Most Leaders | High-Performers | |
|---|---|---|---|
| Communication Approach | Avoid difficult conversations, rely on HR messaging | Standard team meetings, moderate transparency | Daily check-ins, honest discussions about unknowns |
| Work Redistribution | Pile all residual work equally on remaining team members | Some strategic assessment, modest redistribution | Eliminate low-value work first, align remaining work with employees’ skills |
| Retention Strategy | Hope good people will stay | Basic retention efforts, standard check-ins | Immediate stay interviews, increased development |
| Team Support | Leave people to figure it out themselves | Acknowledge difficulty, provide standard support | Regular one-on-ones, address survivor guilt directly |
| Role Clarity | Unclear expectations, same old metrics | Some goal adjustment, moderate clarity | Clear definition of new goals, defined decision-making authority |
| Recovery Timeline | 18+ months or never fully recover | 12-18 months of gradual improvement | 6 months to pre-layoff or better performance |
| Performance Outcomes | Lose top performers to competitors | Moderate talent loss with mixed results | Retain key talent, often improve beyond pre-layoff levels |
Creating Clarity in Chaos
One of the most overlooked aspects of post-layoff leadership involves establishing clear performance expectations and decision-making authority. When team members absorb additional responsibilities, confusion about role requirements, decision making, and success metrics can significantly impact productivity.
Effective leaders quickly define specific, measurable goals for each team member's expanded role, clarify which decisions they can make independently, and establish new definitions of success that reflect current circumstances rather than pre-layoff benchmarks.
Conference
Sep
16
HR Tech Conference Las Vegas 2025
Register
Conference
Oct
27
Gartner HR Symposium/Xpo Orlando 2025
Register
Role clarity becomes critical when teams are already stressed. Clear communication about what success looks like and how performance will be measured creates the foundation for sustained productivity and certainty during uncertain times.
The Competitive Advantage
Organizations that recognize the critical role of individual team leadership during layoffs gain significant advantages over those that focus solely on the financial mechanics of workforce reduction. When most companies are struggling with the hidden costs and productivity losses that typically follow layoffs, teams led by thoughtful managers can actually improve their competitive position, even amid workforce reductions.
The research reveals a counterintuitive truth: while layoffs often fail to achieve their intended financial benefits at the organizational level, they can create opportunities for individual teams to streamline operations, strengthen relationships and build competitive advantages that last long after the crisis passes.
The determining factor isn't whether layoffs occur, but whether team leaders possess the skills and commitment to guide their teams through the disruption thoughtfully. While most organizations handle layoffs poorly, the leaders who understand this opportunity and act on it don't just help their teams survive; they position them to thrive.
Editor's Note: Read more about how companies handle layoffs effectively:
- The Hidden Cost of Losing Employees — Losing employees is an inevitable part of business. But organizations that fail to plan for the full impact of these departures will suffer.
- Managing Through Periods of Fear and Uncertainty — It’s tough for managers to make and act on hard decisions while still keeping employees, customers, investors and other stakeholders happy.
- Rebuilding Trust After Difficult Decisions: A Relationship-Based Approach — Trust declines when decisions are made behind closed doors, but consistent behavior and honest feedback channels help restore confidence.
Learn how you can join our contributor community.
